Last year’s November elections failed to produce a clear majority for either centre right or centre left parties, but Balkenende's Christian Democrats remained the largest party in parliament.
The main problem in the coming negotiations will be to navigate the various issues that have been declared off limits by the three parties in the campaign.
The Labour party wants to limit mortgage tax breaks for the highest income earners, which Balkenende has declared a no-go area.
The Christian Democrats want to loosen restrictions in the labour market to make it more dynamic - a move which Bos’ party opposes.
The Labour party also opposes the relaxation of rent controls in the social housing sector, and the privatisation of Amsterdam's Schiphol airport - both projects of the outgoing centre-right government.
"With euthanasia, [a compromise] is maybe possible ... but with abortion ... I don't see any compromise"
Philip van Praag
Euthanasia and abortion
Balkenende has denounced Labour’s plans to tax wealthy pensioners more to help finance state pensions, as the Netherlands’ substantial ‘baby boomer’ generation is expected to retire very soon.
Another area of disagreement is whether the Netherlands should continue to participate in the F-35 Joint Strike Fighter project to which it is likely to cost the government hundreds of millions of dollars.
Philip van Praag, a political scientist from Amsterdam University, said that while the Christian Democrats and Labour can agree to disagree and hand specific issues to commissions to evaluate, it is the Christian Union’s agenda that will be harder to accommodate.
The Christian Union, a religious party with six seats in parliament, opposes euthanasia and abortion.
"With euthanasia, [a compromise] is maybe possible, you can look in the direction of alleviating pain, but with abortion I think that's really difficult," he said.
"I don't see an easy compromise there."